mortgage

A home seller's guide to the types of mortgages homebuyers can get

Agent holding keys to house | iStock.com/vadimguzhva

iStock.com/vadimguzhva

A bonanza of multiple offers means many home sellers can choose whichever buyer's bid they like best.

The temptation to grab the highest price and call it a deal is naturally strong. But price isn't the only factor that sellers should consider. Financing affects sellers, too -- because if something goes wrong with the mortgage, the sale might not close. From the seller's perspective, here are pros and cons of 4 types of homebuyer financing.

Why cash is king

The best financing is no financing. Cash is so attractive that some sellers will accept a slightly lower sale price from a buyer who doesn't need a loan.

"Sometimes a seller might choose a cash offer over financing because they want or need to close sooner and that would be a much faster transaction with less contingencies," says Mark Fleysher, broker-manager at Sellstate Deluxe Realty in Las Vegas.

No appraisal to kill the deal

One reason a cash sale is advantageous is that no appraisal is required. The lack of an appraisal can make the sale go through more quickly. And it eliminates the risk that the valuation could fall short of the agreed-upon sale price.

"At the end of the day, that's the problem a seller faces: They might have a great buyer whose financing blows up on them because the sale price exceeds the appraised value," says Rob McAllister, mortgage broker with West Seattle Mortgage.

"The lender is only going to lend based on what the appraiser says the home is worth," says Rebecca Marvel, a Realtor for Carrington Real Estate Services in Palmdale, California. "If the appraisal comes in low, the seller has to take less or the buyer has to make up the difference."

Offer must be reasonable

Sometimes the seller's idea of a reasonable discount for cash isn't as large as the cash buyer thinks it should be.

Marvel recalls an investor who made a cash offer of $140,000 for a house listed at $217,000. "I told him, 'They aren't going to accept that. It's crazy low,'" she says. "A lot of cash buyers will pay close to asking, like 95% or 90%."

Condominium restrictions

Condominiums also create preferences for cash because in some cases, cash is the only way a seller can transfer a condo.

"If there's too high a percentage of non-owner-occupancy in a condo community or there are rental restrictions, they could be cash only," Fleysher says. "Or if 1 owner owns too many units, it could be cash only."

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